Many of the acquisitions in the lighting industry are driven by private equity firms. Over the 5.5 years between January 2018 and June 2023, private equity (PE) firms have acquired more lighting manufacturers in the US & Canada than either publicly traded companies or private companies that are not controlled by a PE firm. PE firms executed 41% of lighting M&As, publicly traded companies had 30%, and non-PE private companies had 29% of lighting acquisitions. You can find more on PE in lighting industry acquisitions here.
Looking ahead at 2024, things look more challenging for PE firms, both in the lighting industry and more broadly. Here are four predictions:
- The 2024 presidential election will impact transactions, IPOs, and exit timing. High interest rates and inflation will tamp down PE acquisitions in the first half of 2024. Some deal making and IPOs are expected in Q3 2024 ahead of the election.
- Much PE activity that does occur in 2024 will be directed at tech and healthcare markets.
- PEs will pursue AI that achieves cost reductions and operating efficiency. They may use generative AI tools to help minimize operational overhead, augment work to reduce labor costs, and improve overall back-office efficiency.
- Increased carve-out and tuck-in transactions, but less platform deals in 2024. A carve-out allows a PE firm to capitalize on a business segment that may not be part of its core platform operations while still retaining an equity stake in the subsidiary. A tuck-in acquisition involves the acquisition of a smaller company and integrating it into the PE firm’s platform. This is very similar to a “bolt-on,” except a tuck-in is completely absorbed into the larger PE platform, while a bolt-on may retain some autonomy in structure and operations.
More on these 2024 trends in PE activity can be found here.
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